The Finance Ministry informed the Lok Sabha on Monday that personal income tax (PIT) collection as a percentage of GDP surged by 140 basis points in the last decade, reaching 3.5% in FY 2023-24, up from 2.1% in FY 2014-15. The data, presented by Minister of State for Finance Pankaj Chaudhary, also revealed that PIT collection grew from Rs 2.66 lakh crore in FY15 to over Rs 10.4 lakh crore in FY24 - an increase of 293%.
Revised Tax Terminology
The government has replaced the term "personal income tax" with "non-corporate tax" to better categorize tax contributions from individuals, Hindu Undivided Families (HUFs), firms, associations of persons, bodies of individuals, local authorities and artificial juridical persons.
Factors Driving PIT Growth
Chaudhary stated that PIT collections are influenced by multiple factors, including economic growth, tax rates, taxpayer base expansion, and compliance levels. Therefore, isolating the impact of any single factor on increased government revenue is challenging.
New Tax Regime and Structural Reforms
One of the most significant changes in India's tax framework was the introduction of the new income tax regime under Section 115BAC of the Income-tax Act, 1961, effective from FY 2020-21. This regime, which initially applied to individuals and HUFs, was extended to associations of persons, body of individuals, and artificial juridical persons from FY 2024-25.
Under the new regime, taxpayers can choose between the old system, which offers multiple deductions and exemptions, or the new simplified system with lower tax rates but limited deductions.
New Income Tax Bill 2025
Responding to queries about the New Income Tax Bill, Chaudhary clarified that the simplification exercise aims to create a more accessible and comprehensible tax statute. While the bill may not have an immediate revenue impact, it incorporates all amendments proposed up to the Finance Bill 2025.
The bill emphasizes clear language, tabular representation, and mathematical formulas to improve tax certainty and ease of compliance. Additionally, it retains existing technological reforms like pre-filled ITRs, the Annual Information Statement (AIS), faceless proceedings, and e-filing services to enhance the ease of paying taxes and conducting business.
Impact on Tax Compliance and Economic Growth
The rise in PIT collections underscores improved tax compliance, economic expansion, and government efforts to simplify taxation. As the government continues refining tax laws and implementing digital reforms, further improvements in tax collection efficiency are anticipated.
CAclubindia
